Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 15 — Income Taxes

The Company is subject to U.S. federal, state and local, as well as foreign, corporate income taxes.

The components of the provision for income taxes reflected on the consolidated statements of operations are set forth below:

	For the Years Ended December 31,
	2022		2021		2020
	(in thousands)
Current taxes:
U.S. federal	$	385	$	(2,664)	$	(2,794)
State and local	485		1,073		(306)
Foreign	11,430		4,482		11,535
Total current tax expense	12,300		2,891		8,435
Deferred taxes:
U.S. federal	(8,000)		11,678		1,245
State and local	(2,175)		1,177		264
Foreign	(298)		1,053		(1,517)
Total deferred tax (benefit) expense	(10,473)		13,908		(8)
Total tax expense	$	1,827	$	16,799	$	8,427

The Company accounts for income taxes in accordance with ASC 740, which requires an asset and liability approach for financial accounting and reporting for income taxes. Deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. These deferred taxes are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse.

Significant components of the Company’s net deferred tax assets and liabilities are set forth below:

	As of December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Compensation and benefits	$	16,798	$	17,290
Depreciation and amortization	581		—
Cumulative translation adjustment	14,096		11,679
Operating loss carryforwards	9,146		4,900
Capital loss carryforwards	2,561		2,503
Lease asset	26,963		22,763
Other financial accruals	7,612		1,947
Valuation allowances	(2,561)		(2,503)
Total deferred tax assets	75,196		58,579
	2022		2021
	(in thousands)
Deferred tax liabilities:
Depreciation and amortization	3,934		4,126
Lease liability	22,089		18,537
Other financial accruals	10,731		9,082
Total deferred tax liabilities	36,754		31,745
Net deferred tax asset	$	38,442	$	26,834

Aside from the required reporting of its lease asset for ASU No. 2016-02, the Company’s largest deferred tax asset principally relates to compensation expense deducted for book purposes but not yet deducted for tax purposes. Based on the

Company’s historical taxable income and its expectation for taxable income in the future, management expects this deferred tax asset related to compensation will be realized as offsets to future taxable income.

The Company’s deferred taxes for operating loss carryforwards relate primarily to a current year loss in the United States along with carryforward losses in certain foreign jurisdictions. These jurisdictions, and the United States in particular, have been profitable either in the current year or prior years and the Company believes it is more likely than not they will be profitable in future years. However, management has carefully considered the need for a valuation allowance by evaluating each jurisdiction separately and considering items such as historical and estimated future taxable income, cost bases, and other various factors. Based on all available information, the Company has determined that it is more likely than not that it will realize the full benefit of these operating loss carryforwards and other deferred tax assets for these jurisdictions. As of December 31, 2022, the Company had operating loss carryforwards which in aggregate totaled $36.8 million with $34.7 million available to be carried forward indefinitely and the remaining $2.1 million available to be carried forward four years or longer.

In addition to operating loss carryforwards, the Company has capital loss carryforwards related to the sale of its investments, and these capital loss carryforwards can only be utilized against capital gains in the same jurisdiction. Approximately $2.4 million of the deferred tax asset related to capital loss carryforwards can be carried forward indefinitely and $0.2 million can be carried forward for three years. However, since the Company has nominal remaining investments and considers it more likely than not that the Company will generate capital gains, the Company has established a full valuation allowance against the deferred tax assets related to these capital losses.

The Company is subject to the income tax laws of the United States, its states and municipalities, and those of the foreign jurisdictions in which the Company operates. These laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Management must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. In the normal course of business, the Company may be under audit in one or more of its jurisdictions in an open tax year for that particular jurisdiction. As of December 31, 2022, the Company does not expect any material changes in its tax provision related to any current or future audits.

The Company recognizes tax positions in the financial statements only when management believes it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements. The Company performed an analysis of its tax positions as of December 31, 2022, and determined that there was no requirement to accrue any material additional liabilities. Also, when present as part of the tax provision calculation, interest and penalties have been reported as other operating expenses in the consolidated statements of operations.

Regarding foreign operations in the income tax provision, the territorial-type system enacted as part of the Tax Cuts and Jobs Act is not expected to have a significant impact for the year ended December 31, 2022 or materially impact future years. As such, the Company does not intend to indefinitely reinvest its non-U.S. subsidiary earnings outside the United States.

A reconciliation of the statutory U.S. federal income tax rate of 21% to the Company’s effective income tax rates is set forth below:

	For the Years Ended December 31,
	2022		2021		2020
U.S. statutory tax rate	21.0	%	21.0	%	21.0	%
Increase related to state and local taxes, net of U.S. income tax benefit	(25.8)		3.0		(3.0)
Benefits and taxes related to foreign operations	24.8		3.7		(7.3)
RSU vesting and dividend discrete accounting charge or benefit	(8.8)		1.4		13.3
Charge related to non-deductible compensation	19.8		1.3		2.4
Tax Benefits Related to CARES Act	—		(1.7)		(4.6)
Federal Provision to Return Adjustment	4.8		(0.3)		(1.1)
Other	—		—		0.5
Effective income tax rate	35.8	%	28.4	%	21.2	%

For the year ended December 31, 2022, the rate reconciliation adjustments are unusually large due to the nominal pre-tax income for the period.